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The history of CISG Early Attempt at Uniform CISG Law 1. The Convention Relating to a Uniform Law on the International Sale of Goods (ULIS) q q q Drafted by UNIDROIT Work interrupted by WWII 1964 – adopted by 28 Nations (19 from Western Europe) 2. The Convention Relating to a uniform Law on the Formation of Contracts for the International sale of Goods (ULF) - The previous 2 conventions failed to receive wide acceptance: q United Nations (UNCITRAL) decided to draft a new text
What is the purpose of the CISG? n - Uniform the law governing international sales contracts It establishes a set of rules governing certain aspects of the making and performance of international sales contracts. Why do need a unified international sales law? CISG n
When I was a little boy my daddy said to me, "If you want great riches, son, it's a merchant you should be. You can deal in goods from cars to cod, and earn more than enough. But don't buy or sell 'cross borders, son, cause that's awfully risky stuff. " We didn't have no C-I-S-G. If we bought or sold in another State we didn't know what the law would be. But now there's a Convention to make global trade more free. 'Cept them gol-danged U. S. courts just treat it like the U-CC.
As a young man I took up those words my daddy said. I became a merchant -- traded goods to earn my bread. But I would not buy or sell beyond the borders of my State 'Cause if the deal was not domestic, none could tell my legal fate. We didn't have no C-I-S-G. We were clueless how the law would go if we dealt internationally. But now under this treaty global commerce is a breeze, 'Cept some jerks from Pittsburgh and Denmark say I can't recover no attorney fees.
So now there is a treaty when I buy or sell afar. I can deal with folks from everywhere, from Arles to Zanzibar. The goods I buy are always fine, and my buyers never sue. I hardly need a lawyer — yes, my life's perfection true! Because we have that C-I-S-G. There's no risk in international sales far as the eye can see. But I just received a shipment, so I must quickly say goodbye — 'Cause German courts give me just 5 minutes to inspect and notify
CISG n United Nations Convention on Contracts for the International Sale of Goods n a binding agreement or contract between nations. n Once a country becomes a party of the CISG, they should be bound by the Convention, unless they make any declarations or reservations.
Development of CISG n Drafted by UNCITRAL –联合国国际贸易法委员 会 n Came into force generally on 1 January 1988 n Sets out a set of legal rules on certain matters: 1. 2. 3. 4. General provisions Formation of the contract Obligations of the seller and buyer Remedies for breach
When does the CISG come into play? 1. The contract is one for the sale of goods; 2. The parties have their place of business in different States: 1)The States are Contracting Parties to the CISG Convention (1980) , or 2) the rules of private international law lead to the application of the law of a Contracting State; 3. The application of CISG should not be excluded by the party autonomy
The contract is one for the sale of goods 1. 2. - Contract for sale? Goods? No definition in the convention Contract for sale - can be derived from Article 30 and 53. A contract pursuant to which one party is bound to deliver the goods and transfer the property in the goods sold and the other party is obliged to pay the price and accept the goods. Goods – Should be understood as widely as possible so as to cover all objects which form the subject matter of commercial sales contracts
The contract for sale of goods Q Q The contract for providing legal services The contract for transferring intellectual property rights The contract for selling real estate Barter agreement - Excludes the sales of rights and services
Article 2： This Convention does not apply to sales: (a) of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use; (b) by auction; (c) on execution or otherwise by authority of law; (d) of stocks, shares, investment securities, negotiable instruments or money; (e) of ships, vessels, hovercraft or aircraft; (f) of electricity.
Application of CISG n The seller sells goods made of materials supplied by the buyer. n The seller sells a machine to the buyer for the price of $50, 000. According to the contract, the seller is responsible for installing the machine and training the workers of the buyer to use the machine. The seller should bear the total cost of $30, 000 for the installing and training.
1. “Contracts for the supply of goods to be manufactured or produced” – A contract for the supply of goods to be manufactured or produced is basically treated as a contract of sale. - It is otherwise only if the party ordering the goods has to supply “a substantial part” of the necessary raw materials or semi-finished goods. Substantial - value and necessity • 2. “Contracts for supply and installation” – “A contract for supply and installation” is not treated as a contract of sale. - In most cases it will be necessary for the share of services to be clearly in excess of 50 % in order to constitute the predominant part.
Sales involving a combination of goods and services Article 3 (1) Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production. (2) This Convention does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services.
2. The parties have their place of business in different Contracting States n - Place of business – “the place from which a business activity is defacto carried out [. . . ]; this requires certain duration and stability as well as a certain amount of autonomy” Company A and Company B entered into a contract for selling apples, whether the contract should be governed by CISG? 1) Company A & Company B - registered in US A’s place of business - US B’s place of business - Canada 2) Company A - registered in US - places of business are in US Company B - registered in Canada - places of business are in US n Nationality is not a criteria
2. The parties have their place of business in Contracting States When there is multiple places of busines: - the place of business is that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract;
The States are contracting Parties to the CISG Convention Which countries are "Contracting States? " How do we find out who they are? n http: //www. uncitral. org/uncitral/en/uncitral_texts/sal e_goods/1980 CISG_status. html Chart n China is one of the original countries signed the convention - 78 States had ratified the CISG Convention n n The United Kingdom has so far not ratified the CISG Convention q For an explanation as to why this is so, see: n www. cisg. law. pace. edu/cisg/biblio/moss. html
3. The rules of private international law lead to the application of the law of a Contracting State n n n The seller has a place of business in state A (a noncontracting state) The buyer has a place of business in state B (a noncontracting state) They entered into a sales contract. The contract is signed and performed in country C. (a contracting country) The Buyer brings an action in state B. According to the private international law, the contract should be governed by the law of state C. Whether CISG should be applied? What if country C is China? - China makes reservation to this clause. (also America)
CISG does not concern: Article 4 – validity of the contract ownership of the goods Article 5 – personal injury
CISG - governs the formation of the sales contract. CISG is not concerned with: (a) the validity of the contract or of any of its provisions or of any usage; (b) the effect which the contract may have on the property in the goods sold.
Article 5 This Convention does not apply to the liability of the seller for death or personal injury caused by the goods to any person. The chemicals delivered by the seller to the buyer were defective. The chemicals spontaneously burst into flames. The buyer’s warehouse was burned down and several workers were injured.
OPTING OUT EXPRESS EXCLUSION Ie: 1. “The rights and obligations of the parties under this agreement shall not be governed by the CISG, rather, these rights and obligations shall be governed by the contract law of China. “ 2. “The rights and obligations of the parties under this agreement shall not be governed by the CISG” n IMPLICIT EXCLUSION By adopting the law in a non-contracting country -
OPTING IN n The parties agree to adopt CISG. - principle of autonomy of will
Formation of the contract n Art. 14 – 29 n P 80 -88
Obligation of the seller n n Articles 30 -52 In general, the seller must deliver the goods that conform to the contractual description, hand over documents relating to the goods and transfer the property in the goods. – Art 30
OBLIGATION 1 - Delivery of goods n n Actual delivery - transfer of possession from one person to another Constructive delivery – the goods themselves are not delivered, but the means of obtaining possession of the goods is delivered.
Place of Delivery – specified in the contract n n n Express term Incoterm Implied term ie: free delivery - Art 31
Place of Delivery – not specified in the contract a) b) c) The first carrier – WHEN INVOLVE CARRIAGE The place where the parties knew the goods were located or were to be manufactured or produced. In all other cases, at the buyer’s disposal
When deliver the goods to the carrier: The seller must, either: n identify to the carrier both the goods and the buyer “by marking on the goods, by shipping documents or otherwise” or n give the buyer notice of the consignment of the specifying goods
Time for Delivery: Art. 33 The seller must deliver the goods: (a) if a date is fixed by or determinable from the contract, on that date; (b) if a period of time is fixed by or determinable from the contract, at any time within that period unless circumstances indicate that the buyer is to choose a date; or (c) in any other case, within a reasonable time after the conclusion of the contract.
OBLIGATION 2 – the duty to hand over documents -Art 34 n If the seller is bound to hand over documents relating to the goods, he must hand them over at the time and place and in the form required by the contract. documents relating to the goods: bills of lading, dock receipts, warehouse receipts, insurance policies, commercial invoices, certificates of origin, etc
OBLIGATION 3 Conformity of the goods n Arts. 35 -44 Article 35 (1) The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract. .
The seller’s assurance of the quality of goods (2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (a) are fit for the purposes for which goods of the same description would ordinarily be used; (b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement; (c) possess the qualities of goods which the seller has held out to the buyer as a sample or model; (d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods.
WAIVER n if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity
Seller’s right to remedy Article 37 - before the date for delivery The seller has the right to: n deliver any missing part n make up any deficiency in the quantity of the goods delivered n deliver goods in replacement of any non-conforming goods delivered n remedy any lack of conformity in the goods delivered n - Should not cause the buyer unreasonable inconvenience or unreasonable expense.
Buyer’s obligation of examination The buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances. If the contract involves carriage of the goods, examination may be deferred until after the goods have arrived at their destination. - - If the goods are redirected in transit or redispatched by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or redispatch, examination may be deferred until after the goods have arrived at the new destination.
n Method of examination? - COMPREHENSIVE RANDOM -
Buyer’s obligation of notifying the nonconformity Article 39 - The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it. - In any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer, unless this timelimit is inconsistent with a contractual period of guarantee.
Obligation 4 – Assurance of “clean” goods n Article 41 – The goods should not subject to third-party claims of ownership n Article 42 – The goods should not subject to third-party claims of rights in intellectual property
n n Article 38 – obligation of examination Article 39 - send notice to the seller Exception: The seller knew or could not have been unaware and which he did not disclose to the buyer.
Assurance of the ownership n n The third party brought an action against the buyer asserting he was the owner of the goods. The buyer notifies the seller, and the seller replied that the third party’s assertion were false. The buyer successfully defended the action. The buyer suffered loss of $50000 because the litigation prevented him from using the goods and the buyer had to pay $1000 for the litigation.
Claims of rights in intellectual property Article 42 (1) (a) under the law of the State where the goods will be resold or otherwise used (the parties knew when the contract was concluded (b) in any other case, under the law of the State where the buyer has his place of business. (2) The obligation of the seller under the preceding paragraph does not extend to cases where: (a) at the time of the conclusion of the contract the buyer knew or could not have been unaware of the right or claim; or (b) the right or claim results from the seller's compliance with technical drawings, designs, formulae or other such specifications furnished by the buyer.
OBLIGATIONS OF THE BUYER n Article 53 1. Pay the price Take delivery 2.
Remedies for breach of contract Breach of the contract - the non-performance of a duty under a contract n n Fundamental Breach Non- fundamental breach
Article 25 – Fundamental breach A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result.
Fundamental Breach (1) A breach of contract results in detriment (2) The detriment must substantially deprives him of what he is entitled to expect under the contract (3) The violating party must have foreseen the result of breach. BURDEN OF PROOF 1), 2) – the aggrieved party 3) – the violating party
Ø Ø Ø u u u Seller – Australia Buyer – U. S. Goods – Turkey (for resell during Charismas) Deliver the goods to Boston between 15 Dec – 19 Dec 2010 Actual deliver - 29 Dec 2010 Seller – Australia Buyer – U. S. Goods – chicken (for resell) Deliver the goods to Boston between 15 Dec – 19 Dec 2010 Actual deliver - 29 Dec 2010 The market price of chicken did not fluctuate in Dec, 2010
Remedies of the parties under the CISG: 1. Avoid the contract 2. Claim specific performance. 3. Compensation
Avoidance of the contract - Fundamental breach, or - The party gives the violating party the Nachfrist notice, the violating party rejects it or does not perform within the period it specifies n The party may cancel the contract by notifying the violating party of the avoidance.
Avoidance of installment contracts Article 73 1) Fundamental breach with respect to a particular installment – the other party may declare the contract avoided with respect to that installment. 2) The breach of one installment gives the other party good grounds to believe that a fundamental breach of future installment will occur 3) If the installments are interdependent, a fundamental breach of one installment will allow a party to avoid the entire contract. (past and future installments included)
Anticipatory breach – suspension of performance Prior to the date of performance: It becomes apparent that the other party will not perform a substantial part of his obligations as a result of: (a) a serious deficiency in his ability to perform or in his creditworthiness; or (b) his conduct in preparing to perform or in performing the contract. - Suspension of performance Ø must immediately give notice of the suspension to the other party Ø must continue with performance if the other party provides adequate assurance of his performance.
Anticipatory breach – Avoidance of the contract Article 72 － If prior to the date for performance of the contract it is clear that one of the parties will commit a fundamental breach of contract, the other party may declare the contract avoided. The innocent party may choose to 1. Declare the contract avoided and claim compensation before the date of performance, or 2. Affirm the contract and demand performance. Then claim compensation after the date of performance
Anticipatory breach – Avoidance of the contract n n 1. 2. Date of performance – 1 March 2010 1 Feb 2010, the Seller notified the Buyer they would not perform the contract. 2 Feb. 2010, the Buyer replied and insisted the seller to deliver the goods 5 Feb 2010, the goods were destroyed during the storm. On 2, Feb - the buyer could avoid the contract and claim compensation for breach 30 Feb 2010 – the buyer lose the right to claim compensation for breach
Specific Performance & Damages n In common law countries q Firstly: compensation are preferred (common law) q Then: specific performance (equity law) n In civil law countries q Firstly: specific performance q Then: compensation
Specific Performance & Damages n CISG q n Article 28: if, in accordance with the provisions of this convention, one party is entitled to require performance of any obligation by the other party, a court is not bound to enter a judgement for specific performance China q q Firstly: specific performance Then: compensation
Claim compensation n 1) 2) - Art. 74: Actual loss Loss of profit Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract,